BILL ANALYSIS �
AB 2517
Page 1
ASSEMBLY THIRD READING
AB 2517 (Daly)
As Amended May 15, 2014
2/3 vote. Urgency
REVENUE & TAXATION 9-0
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|Ayes:|Bocanegra, Harkey, Beth | | |
| |Gaines, Gordon, Mullin, | | |
| |Nestande, Pan, | | |
| |V. Manuel P�rez, Ting | | |
| | | | |
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SUMMARY : Allows local entities until January 1, 2016, to issue
Enterprise Zone (EZ) employee eligibility vouchers when voucher
applications are submitted by January 1, 2015. Specifically,
this bill :
1)Allows any local entity previously authorized to issue
employee eligibility certifications (i.e., vouchers) under the
EZ Act, the provisions governing Targeted Tax Areas (TTAs), or
the Local Agency Military Base Recovery Area (LAMBRA) Act, to
issue vouchers until January 1, 2016, when the application is
submitted by the current deadline of January 1, 2015.
2)Takes immediate effect as an urgency statute.
EXISTING LAW provides that, notwithstanding the repeal of the EZ
Act, the provisions authorizing TTAs, and the LAMBRA Act, a
local entity formerly authorized to issue employee eligibility
vouchers, may continue to accept voucher applications and to
issue vouchers up to, but no later than, January 1, 2015.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS : The author has provided the following statement in
support of this bill:
AB 2517 is a commonsense measure aimed to assist
California businesses currently transitioning into a
new business environment as a result of the recent
Enterprise Zone (EZ) reforms by allowing businesses to
have the opportunity to claim EZ hiring tax credits
AB 2517
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prior to the passage of AB 106 (Committee on Budget,
2013-2014).
Assembly Revenue and Taxation Committee staff comments:
1)Background information: Legislation enacted in 2013 repealed
provisions of the Government Code under which local entities
had vouchering authority with respect to EZ, LAMBRA, and TTA
hiring credits as of January 1, 2014. Taxpayers without a
voucher are ineligible for the hiring credits.
On September 26, 2013, the Governor signed further "clean-up"
legislation, AB 106 (Budget Committee), Chapter 355, Statutes
of 2013. Among other things, AB 106 clarified that an EZ
hiring credit would not be allowed with respect to any
employee who first commenced employment on or after January 1,
2014. AB 106 also allowed local entities to accept voucher
applications and to issue vouchers until January 1, 2015.
Thus, for an eligible employee hired before January 1, 2014,
the employer currently has until January 1, 2015 to obtain a
voucher necessary for the EZ hiring credit.
2)What would this bill do? Currently, local entities are not
permitted to issue vouchers after January 1, 2015. If this
provision were enacted, however, a taxpayer could submit a
voucher application on December 31, 2014, and the local entity
would have until January 1, 2016, to issue a voucher.
3)Credits are designed to incentivize behavior: Generally, tax
credits are provided as a matter of legislative grace to
encourage socially beneficial behavior that likely would not
occur absent a financial incentive. One of the main
criticisms of the former EZ hiring credit, in turn, is that it
did not always function as an incentive to hire disadvantaged
individuals. Specifically, the credit regime gave rise to a
lucrative business model whereby consultants would approach
taxpayers who were often completely unaware that they were
operating in an EZ. These consultants would then obtain
vouchers for qualified employees (often hired years before)
and help the taxpayer claim the EZ credit by filing amended
returns for prior open years. In return for its services, the
consulting firm would charge a percentage of any refund moneys
obtained. Critics argued that in such "retro-vouchering"
situations the credit was clearly not acting as an incentive
to hire. This bill raises some of the same concerns. If a
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taxpayer hired a qualified employee prior to the January 1,
2014 deadline, why is an entire year insufficient to obtain
the required voucher paperwork? Would not such a period of
time be sufficient, especially for a taxpayer who was aware
the employee qualified for the credit at the time of hiring?
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098
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